This post, and the video, comes about because of a few different conversations that I have had with people over the past few months. One is, "why is your stuff so much more expensive" or more accurately "you charge how much?!?" and two, "what do you think I should sell (insert product) for?"
We can answer both conversations with the same blog (or video if you have now stopped reading and gone off to youtube). There is a method to how I price my items. It's something that has taken me a few years to hone in on, but this is what works for me.
Now there are some standard methods, like materials x 2 or materials x 3. I've also seen: materials + labor = cost x 2 = whole sale x 2= retail. Let me tell you, if I did that, my corsets would retail for $500 for the cheap ones. These methods did give me a place to start, but to get into my final groove, there is a little more math involved.
To start, I like to build a spreadsheet in Excel. You can do this by hand, or with any other program, I just find an Excel spreadsheet to be the easiest.
Now we have to figure expenses. Materials are pretty easy to sort out. I use a column for each material and put in the cost. Example I have a column for fabric type, next would be "price per yard" followed by "yardage used" and then "total fabric cost." I break down each material this way until I have all of my materials. Then total material.
Next section is labor. This is the amount that you will pay yourself when each item is sold. (material funds go back to restock those materials). Price your labor at a fair rate. You wouldn't work for some one else for less than min wage, don't work for yourself for less. For most art types, $11.50-$15/hour is the going rate. So in this section you will have "labor $", "labor time", and "labor total"
So now we have our material cost and our labor cost, and you can stop here, but if you want to build your business, you need to also add in profit. There are several ways to do this, but I start at 1.5 x (material cost + labor cost). From there I can decide if I need to charge more or less.
Let's put that math to work. Let's say we've done all of the math and our item costs $5 in materials and takes us 1 hour to make. For this example we are going to use $11.50 as our labor rate. Just in materials and labor we are at $16.50. Now multiply that by 1.5 and we have $24.75. Now we will look at our item and decide if we think that is too much, or too little and adjust accordingly. When our item is sold, we use $5 to restock, $11.50 goes in our pocket, and $8.25 is used to build the business. This could me doing other art shows, paying for advertising, buying different materials, etc.
Short hand: restock materials + pay yourself + build the business = sell price